Today we’re going to take a look at the well-established Henderson Land Development Company Limited (HKG:12). The company’s stock received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$42.8 at one point, and dropping to the lows of HK$36.2. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Henderson Land Development’s current trading price of HK$37.35 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Henderson Land Development’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Henderson Land Development
What’s the opportunity in Henderson Land Development?
According to my valuation model, Henderson Land Development seems to be fairly priced at around 0.43% above my intrinsic value, which means if you buy Henderson Land Development today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is HK$37.19, there’s only an insignificant downside when the price falls to its real value. Furthermore, it seems like Henderson Land Development’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Henderson Land Development generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Henderson Land Development, at least in the near future.
What this means for you:
Are you a shareholder? Currently, 12 appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.